In a corner office on Microsoft's leafy, low-rise campus in suburban Seattle, a bespectacled, slightly portly middle-aged man has been packing up his belongings. Bill Gates logged off yesterday after 33 years in day-to-day control of the world's biggest software company.

Gates, 52, is retiring in order to spend more time giving away his $58bn fortune. On his last day, he delivered a tearful valedictory address to staff with his righthand man, Microsoft's chief executive, Steve Ballmer, by his side.

"There won't be a day in my life when I won't be thinking about Microsoft, the great things that we're doing and wanting to help," said Gates, wiping his eyes as a crowd of 830 employees rose to their feet to applaud.

Gates will remain part-time chairman of the board and will take on occasional projects - the first of which is to improve Microsoft's web search capabilities. But the one-time boy wonder of the computer world's reign as a technological guru is officially over.

"There's no way to say thanks to Bill," said Ballmer, who presented Gates with a large scrapbook. "Bill's the founder, Bill's the leader. This is Bill's baby."

In a rare period of inactivity, Gates plans a trip to the Beijing Olympics and a spell of leisure over the summer. Then he plans to set up an office in Seattle's Eastside area to delve deeper into the world's medical, biological and environmental challenges for his Bill and Melinda Gates Foundation.

He told staff that he was making way for new talent: "With my not being here full time there is some opportunity that people will really step up. There's somewhat of a vacuum created there."

Gates has been "transitioning" out of Microsoft for two years and to many in the technology industry the company itself has been fading from prominence. It hasn't released a blockbuster product for a decade and its mantle as a leading innovator has been inherited by Google.

Yet Rob Helm, research director for an independent consultancy, Directions on Microsoft, says Gates kept a close eye on the company until relatively recently through "Bill G reviews". "A team would go into his office with other interested parties and Gates would grill them about the project they were working on - both from a business and a technical standpoint," says Helm.

These sessions, says Helm, could be sorely missed: "The Bill G review was Microsoft's compass to keep all its groups pointing in the same direction. And only he could really do that - only he had that depth of knowledge."

Gates's encyclopaedic mind has almost legendary status at Microsoft. He used to take a book when his family took him to watch the University of Washington football team as a child. Aged 11, he won a bet with a local pastor that he could memorise all three chapters of St Matthew's account of the Sermon on the Mount.

He established Microsoft with a school friend, Paul Allen, in Albuquerque in 1975. They got their big break five years later by landing a deal to provide operating systems to IBM.

But Microsoft's history has been peppered with controversy over its robust attitude to competition. In the 1990s, its practice of embedding internet browsers in operating systems caused a particular furore, making it tough for rivals such as Netscape. The company has repeatedly been accused of making it hard for rivals to make applications compatible with its operating systems.

"He could be calculating, devious and brutal," says Marc Aronson, author of a soon-to-be-released book, Bill Gates: Up Close. "On the other hand, he's created something - he is a builder."

When Microsoft was threatened with a break-up by the US competition authorities and fined by the European commission, Gates's reputation reached a nadir. A US judge described the company in 2000 as "untrustworthy".

Since then, Gates has reinvented himself as a philanthropist. "Gates always likes to be at a knife-edge point between absolute success and absolute disaster," says Aronson. "Being the richest, or third-richest, guy in the world is not a challenge any more. But fighting malaria is a challenge because there's a high chance of failing."

Some believe Gates is getting out at the right time. Microsoft remains hugely profitable - it is forecast to make earnings of $17bn from revenues of $60bn for the 12 months to June. But its two main products, which command near monopolies, Word and Office, are facing challenges - notably from free word processing and spreadsheet applications hosted on the internet by Google.

Critics say that Microsoft has struggled to grasp the trends shaping the latest generation of the internet, dubbed "Web 2.0". The company has resorted to trying to buy its way in by snapping up a stake in Facebook last year and through its recent aborted attempt to buy Yahoo.

"People who are discounting Microsoft's relevance are making a mistake," says Michael Gartenberg, a technology analyst at Jupiter Research. "People who underestimated Microsoft have discovered their mistake to their cost."

Gates is likely to spend more time with his three children at his mansion overlooking Lake Washington, but the business world hasn't seen the last of him.